Business merger under common control: The companies involved in the merger are ultimately controlled by the same party or the same parties before and after the merger. The control is not temporary.

Business mergers not under the same control: merger transactions in which the parties involved in the merger are not ultimately controlled by the same party or the same parties before and after the merger, that is, other business mergers other than business mergers under the same control

The business combination contract or agreement has been approved by the shareholders’ meeting (or shareholders’ meeting)

Business merger matters that need to be reviewed and approved by the relevant national competent authorities have been approved

All parties involved in the merger have gone through the necessary procedures for transfer of property rights.

The merging party or purchaser has paid most of the merger price (generally more than 50%) and has the ability and plan to pay the remaining amount

The merging party or purchasing party has actually controlled the financial and operating policies of the merged party or purchased party, and enjoys corresponding benefits and bears corresponding risks.

If there are specific provisions in the contract agreement, accounting treatment shall be carried out in accordance with the contract agreement.

If there is no specific agreement in the contract agreement, accounting treatment shall be carried out in accordance with the relevant provisions of the "Company Law of the People's Republic of China" and other laws and regulations.

If the contract clearly stipulates the time and amount of capital contribution, and the investor has corresponding shareholder equity based on the subscription ratio, the investor should confirm a financial liability (other payables) and the corresponding assets (long-term equity investment)

If there is no explicit agreement in the contract, it is a future capital commitment and no financial liabilities and corresponding assets will be recognized.

General situation: Intermediary fees such as auditing, legal services, evaluation and consulting, and other related management fees incurred by the merging party shall be included in the current management expenses when incurred. Borrow: administrative expenses Loan: bank deposit

Special case

Borrow: Long-term equity investment Capital reserve--capital premium/equity premium ① Surplus reserve② Profit distribution--undistributed profits ③ Loan: bank deposit, etc.

The purchaser shall use the determined business combination cost as the initial investment cost of the long-term equity investment

The cost of a business combination includes the sum of the fair values ​​of the assets paid by the buyer, liabilities incurred or assumed, and equity securities issued (fair value of the consideration paid: price including tax)

General situation: Intermediary fees such as auditing, legal services, evaluation and consulting, and other related management fees incurred by the purchaser shall be included in the current management expenses when incurred. Borrow: administrative expenses Loan: bank deposit

Special circumstances (same as business combination under common control)

Debit: Fixed assets liquidation (book value) Accumulated depreciation Fixed asset impairment provision Credit: fixed assets

Borrow: Long-term equity investment (fair value: price including tax) Dividends receivable Gains and losses on asset disposal (fair value < book value) Credit: Liquidation of fixed assets (book value) Taxes payable--VAT payable (output tax) Gains and losses on asset disposal (fair value > book value)

Borrow: Long-term equity investment (fair value: price including tax) Dividends receivable Investment income (fair value < book value) Credit: Trading financial assets/other debt investments/long-term equity investments (of other companies) (book value) Investment income (fair value > book value)

at the same time: Borrow: other comprehensive income/capital reserves--other capital reserves Credit: Investment income or: reverse

Borrow: Long-term equity investment (fair value) Dividends receivable Credit: Other equity instrument investments (book value) Surplus reserve (difference, or debit) Profit distribution - undistributed profits (difference, or debit)

Borrow: other comprehensive income (can be borrowed or loaned) Credit: Surplus reserve Profit distribution--undistributed profits

The basic principle

Specific processing

The investee declares the distribution of cash dividends or profits: Borrow: Dividends receivable Credit: Investment income

The subsidiary transfers undistributed profits or surplus reserves to share capital (paid-in capital) and does not provide investors with the option of equivalent cash dividends or profits. The parent company does not obtain the right to receive cash or profits. This transaction Usually it is a reclassification of the subsidiary's own equity structure, and the parent company should not recognize related investment income.

The basic principle

Borrow: Asset impairment loss Credit: Provision for impairment of long-term equity investments

Directly held: those held by venture capital institutions, mutual funds and similar entities are classified as measured at fair value and changes are included in the initial recognition in accordance with the provisions of "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments" Financial assets for current profits and losses, regardless of whether the above entities have a significant impact on this part of the investment, should be recognized and measured in accordance with the provisions of "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments" (essence: purpose of investment, realization of value Way)

Indirect holding: An investor's equity investment in an associated enterprise, part of which is held indirectly through venture capital institutions, mutual funds, trust companies or similar entities including investment-linked insurance funds, regardless of whether the above entities invest in this part If it has a significant impact, investors can choose to measure this part of the investment held indirectly at fair value and include the changes in current profits and losses in accordance with the relevant provisions of "Accounting Standards for Business Enterprises No. 22 - Measurement of Recognized Amount of Financial Instruments", and Account for the remainder using the equity method

Meaning: It means that the investor has the right to participate in decision-making on the financial and operating policies of the investee, but it is not able to control or jointly control the formulation of these policies with other parties.

Judgment criteria

Operational points

Borrow: Long-term equity investment--investment cost (initial investment cost) Loan: bank deposit, etc.

Borrow: Long-term equity investment--investment cost (initial investment cost) Loan: bank deposit, etc. Borrow: Long-term equity investment - investment cost (fair value share of the investee's identifiable net assets - initial investment cost) Credit: Non-operating income

Book value of net assets (owner's equity) (book owner's equity)

Book value of identifiable net assets = Book value of net assets (owners’ equity) – Goodwill

Fair value of identifiable net assets = book value of identifiable net assets plus the assessed appreciation or impairment of inventories, fixed assets, etc.

Net profit: Borrow: Long-term equity investment--Profit and loss adjustment (2 situations: book net profit, adjusted net profit) Credit: Investment income

Net loss: Borrow: investment income Credit: Long-term equity investment--profit and loss adjustment

If the accounting policies and accounting periods adopted by the invested unit are inconsistent with those of the investing enterprise, the financial statements of the invested unit shall be adjusted according to the accounting policies and accounting periods of the investing enterprise.

The amount of depreciation or amortization calculated based on the fair value of the fixed assets and intangible assets of the investee when the investment was obtained, and the amount of asset impairment provisions calculated and determined based on the fair value of the investing enterprise when it obtained the investment. Impact on Net Profit of Investment Units

When assessing whether an investor has significant influence on the investee, the impact of potential voting rights should be considered. However, when determining its share of the investee’s realized net profits and losses, other comprehensive income and other changes in owner’s equity, the potential voting rights must be considered. The corresponding share of equity shall not be taken into account. (Consideration, but not accounting)

When confirming the amount of net profit (or loss) of the investee that should be enjoyed or shared, regulations or articles of association stipulate that the net profits and losses that do not belong to the investing enterprise should be calculated after excluding them. For example, the investee has issued accumulable equity securities classified as equity. For preference shares and other similar equity instruments, regardless of whether the investee declares the distribution of preference stock dividends, when the investor calculates the net profit of the investee, the accumulated preference stock dividends attributable to other investors shall be deducted.

When recognizing investment income, in addition to considering the adjustment of fair value, unrealized internal transaction gains and losses between the investing enterprise and its associates and joint ventures should be offset.

The investing enterprise cannot reasonably determine the fair value of the investee's identifiable assets when obtaining the investment.

At the time of investment, the fair value of the identifiable net assets of the investee is compared with its book value, and the difference between the two is not significant.

If the information required to adjust the net profit of the invested unit cannot be obtained due to other reasons, the calculation results of the net profit of the invested unit and the shareholding ratio can be directly recognized as investment gains and losses.

Counterflow transaction: an associate or joint venture sells assets to an investor

Downstream transaction: the investor invests or sells assets to its associates or joint ventures (including the investor setting up associates or joint ventures in the form of investing assets)

Individual financial statements: How much is subtracted in the first year, and how much is added back when realized in the second year (for example, 40% of the inventory has been sold in the first year, then the unrealized internal transaction gains and losses are 60%, and a maximum of 60% is added back in the second year) )

Consolidated financial statements: what is invested in the enterprise, what is offset, assets versus assets, profit and loss versus profit and loss

Offsets between parent and subsidiary companies: Offsets between its associates and joint ventures

Full offset: only the investment company or the subsidiary included in the consolidated financial statements of the investment company enjoys the equity share of the associate or joint venture

For downstream transactions with associates and joint ventures, when the investor applies the equity method to confirm the net profits and losses it enjoys, the unrealized internal transaction profits and losses generated by the downstream transactions should be offset in proportion to its share.

When the book value of the long-term equity investment has been written down to zero, considering that the book value of the long-term equity investment should not be negative, the investor should recognize the portion of the book value of the long-term equity investment that is insufficient to offset it as deferred income, and wait for subsequent relevant Profit and loss will be carried forward to profit and loss when realized

If the unrealized internal transaction losses incurred between an investment enterprise and its associates and joint ventures, regardless of whether they are downstream transactions or counter-current transactions, are impairment losses on the transferred assets, the relevant unrealized internal transaction losses shall not be offset. , should be fully borne by the impaired assets

A transaction involving the investment or sale of assets between an investor and an associate or joint venture (including the investor establishing an associate or joint venture in the form of investment of assets), and if the assets constitute a business (such as investing in a branch), The following processing should be carried out

The significant risks and rewards associated with the investment of ownership of non-monetary assets are not transferred to the joint venture

Gains and losses from investing in non-monetary assets cannot be reliably measured

Investment transactions in non-monetary assets do not have commercial substance

If the joint venture party transfers the significant risks and rewards related to the ownership of the invested non-monetary assets, and the invested assets are left for the use of the joint venture, the gains and losses attributable to the other joint venture parties shall be recognized in the transaction.

If the transaction indicates that the non-monetary assets invested or sold suffer impairment losses, the joint venture party shall fully recognize the loss (bear the full amount and no longer offset it)

When an investor invests non-monetary assets in an associated enterprise and generates profits and losses, the accounting treatment shall be based on the same principles as above.

Book value of long-term equity investment: sum of four detailed accounts minus impairment provisions

When an investing enterprise confirms that it should share the losses incurred by the investee, it should proceed in the following order:

After confirming the relevant investment losses, if the net assets of the investee increase in the subsequent period, the investor shall conduct accounting treatment in the reverse order of the previous confirmation or registration of the relevant net investment losses, that is, write down the amount of unrecognized net investment losses in sequence. , restore other long-term interests and restore the book value of long-term equity investments. At the same time, investors should also re-examine the book value of estimated liabilities.

Under equity method accounting, when the owner's equity of the invested unit changes, the investor should adjust the book value of the long-term equity investment (profit and loss adjustment, other comprehensive income and other equity changes) according to its share ratio, and recognize investment profits and losses and other comprehensive income accordingly. and capital reserve to reflect changes in the owner's equity of the invested unit

If the investor's long-term equity investment has been reduced to zero and there is an unrecognized net investment loss, when the net assets of the investee increase subsequently, the investor shall first recognize the relevant investment gains and losses according to its share ratio and changes in the net assets of the investee. , other comprehensive income, capital reserves and the book value of long-term equity investment; then the net investment loss that has not been recognized in the previous period is recognized based on the lower of the net change in the net assets of the investee that should be enjoyed in the current period and the net investment loss that has not been recognized in the previous period. , unconfirmed net investment losses continue to be registered in the record keeping

Increase: Borrow: Long-term equity investment--other comprehensive income Credit: Other comprehensive income

reduce: Borrow: other comprehensive income Credit: Long-term equity investment--other comprehensive income

Basic rules

special regulations

When accounting using the equity method, for other changes in the owner's equity of the invested unit other than net profit and loss, other comprehensive income and profit distribution, the investing enterprise should calculate its share based on the proportion of equity held and adjust the book value of the long-term equity investment. At the same time, it is included in the capital reserve - other capital reserve and is registered in the reference book. Borrow: Long-term equity investment--other changes in equity Credit: Capital Reserves--Other Capital Reserves

Follow-up processing

The invested unit accepts capital investment from other shareholders

The equity component contained in the convertible corporate bonds issued by the investee that can be traded separately

Equity-settled share-based payment

Other shareholders' capital increase in the invested unit results in changes in the investor's shareholding ratio (dilution of equity), etc.

Carry-forward of "embedded goodwill" when passive dilution results in a decrease in shareholding ratio

Treatment of investors’ equity dilution losses

If the new investment cost is greater than the fair value share of the investee's identifiable net assets calculated based on the new shareholding ratio on the new investment date, the long-term equity investment cost will not be adjusted; otherwise, adjustment will be required

When making the above adjustments, goodwill or the amount included in profits and losses related to the original investment and the additional investment should be comprehensively considered.

The second positive goodwill: no adjustment is involved; the second negative goodwill: may involve adjustments [(prudent principle: avoid over-recognition of non-operating income))

Conversion from fair value measurement to cost method (5%→55%)

Convert equity method to cost method

If the former is greater than the latter, the book value of the long-term equity investment will not be adjusted.

If the former is less than the latter, the difference shall be adjusted to the book value of the long-term equity investment and included in the non-operating income of the current period.

The remaining equity investment will be accounted for in accordance with the recognition and measurement standards for financial instruments. The difference between its fair value and book value on the date when joint control or significant influence is lost will be included in the current profit and loss.

Relevant other comprehensive income originally calculated using the equity method shall be accounted for on the same basis as if the investee directly disposed of relevant assets or liabilities when the equity method is terminated.

Owner's equity recognized due to changes in other owners' equity of the investee other than net profit and loss, other comprehensive income and profit distribution shall be fully transferred to the current profit and loss when the equity method is terminated.

Selling equity investment portion Debit: bank deposit Credit: Long-term equity investment—investment cost —Profit and loss adjustment (can be borrowed or loaned) —Other comprehensive income (can be borrowed or loaned) 1. Other changes in equity (can be borrowed or loaned) Investment income (can be borrowed or loaned)

Remaining equity investment Borrow: Trading financial assets/other equity instrument investments (fair value) Credit: Long-term equity investment—investment cost —Profit and loss adjustment (can be borrowed or loaned) —Other comprehensive income (can be borrowed or loaned) 1. Other changes in equity (can be borrowed or loaned) Investment income (can be borrowed or loaned) at the same time: Borrow: other comprehensive income Credit: Investment income or reverse Borrow: Capital Reserve - Other Capital Reserve Credit: Investment income or reverse

Accounting treatment should be carried out according to the recognition and measurement standards of financial instruments.

The difference between the fair value and the book value on the date of loss of control is included in the investment income of the current period.

Disposal of some equity investments Debit: bank deposit Loan: Long-term equity investment investment income

The difference between the fair value and the book value of the remaining equity Borrow: Trading financial assets/other equity instrument investments (fair value) Loan: Long-term equity investment investment income

All parties involved are bound by the arrangement

Two or more parties exercise joint control over the arrangement

Definition: It refers to the common control over an arrangement in accordance with relevant agreements, and the relevant activities of the arrangement must be decided with the unanimous consent of the participants sharing control rights.

Judgment principles

collective control

Decisions on related activities

Participants with only protective rights do not enjoy joint control

As long as two or more parties exercise joint control over the arrangement, an arrangement can be deemed a joint arrangement. It does not require that all parties have joint control over the arrangement.

Participants who share common control over a joint arrangement (participants who share control) are called "joint parties"; participants who do not share joint control over a joint arrangement are called "non-joint parties"

Separate legal entity (e.g. limited liability company)

Entities that do not have legal entity qualifications but are recognized by law (such as partnerships, cooperative enterprises, trusts, funds, etc.)